Shareholder Proposals Target Climate Change Risk

As the Trump administration has backed away from extending even the modest efforts on climate change initiated by his predecessor– let alone initiating any policy even remotely adequate toward confronting the magnitude of the problem– three types of efforts loom larger.

First, are those by other countries to move away from fossil fuels, toward renewable sources of energy. These are not limited to developed countries, but as I wrote here, now also include China and India, the world’s two most populous countries, each of which is attempting to curtail use of fossil fuels.

Use psychological pricing methods.

The Journal notes that last year, three successful proposals at Occidental, Exxon, and PPL “were the first to garner majority votes on resolutions for annual disclosure of the impact on business from global efforts to limit the average rise in temperatures.

As investors such as BlackRock look deeper into strategy and climate change issues (and call them out specifically in their shareholder engagement activities), they are increasingly becoming more active in their support for calls for increased transparency and disclosure regarding portfolio companies’ preparedness for climate change.

EY’s 2017 investor survey on ESG issues found that investors routinely included ESG considerations as part of their investment decisions. Shareholders are not only paying closer attention to non-financial indicators, but they are also more likely to take action on such information.

Demonstrate the differences

According to the study, the percentage of respondents who consider nonfinancial disclosures to be seldom material or have no financial impact dropped from 60% in 2013 to 16% in 2016.

Offer a money-back guarantee

Furthermore, the report found that, when faced with disclosures of risk or history of poor environmental performance, 15 percent of investors responded that they would rule out the investment immediately, while 76 percent would reconsider the investment.

Test your offer and price, and be creative.

Similarly, 8 percent of investors responded that they would rule out an investment with disclosures involving risk from climate change, while 71 percent would reconsider the investment.

Actual voting data seems to confirm the study; many shareholders are coming off the sidelines on environmental and social shareholder proposals.